Amazon's next target should be Grubhub-and here's why, says top analyst

Author: Zachary Reyes Jun 22, 2017,

Jun 22, 2017, 10:56

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Whole Foods is part of the "crème de la crème of the supermarket industry" and is a "hand-in-glove fit" with the educated, relatively affluent demographic of Amazon customers who pay $99 a year for the site's Prime membership that includes free shipping, video streaming and other services, Greif said.

He didn't use that phrase per se when describing the deal to employees at a town hall on Friday, but he might as well have: If you read the transcript of his remarks, which Whole Foods included yesterday in a new SEC filing, his praise of Amazon sounds more like a man toasting his fiancée at their engagement party.

The online retail giant's surprise acquisition of Whole Foods comes at a time when Amazon has been inserting itself into the grocery market, and Whole Foods had been cutting prices.

Cowen senior internet analyst John Blackledge, also on "Squawk Alley", didn't say whether he thought Grubhub could be on Amazon's takeover list. That's a significant five-fold jump from where sales are today, but to really accelerate the growth of its presence in this market, Amazon needed to make a big move.

Some Wall Street analysts are starting to wonder whether another retailer will come up with a higher offer and start a bidding war for the Whole Foods grocery chain.

"I think retailers are going to have to bring a lot of excitement to the store", said Stew Leonard Jr., CEO of Stew Leonard's, a grocery chain with five locations in CT and NY. Whole Foods, meanwhile, saw six consecutive quarters of falling same-store sales and recently announced plans to close a number of stores. This is not- this is not a Tinder relationship. "This would give them a very premium brand that has a lot of credibility with customers, and puts them right in the middle of the grocery industry in one fell swoop". "They're not stupid enough to go change that".

Experts note that most Whole Foods shoppers are already familiar with Amazon and are lining up for what could be a smooth transition. Her daughter Bethany Capels agrees and says she likes Whole Foods for the organic fruits she can serve her kids. More seriously, he said it was too early to discuss these kinds of details, but highlighted that one of Amazon's core values take Whole Foods is likely to embrace is frugality. "If there ever was a time crunch, I'd consider it", he said. He noted that Amazon was known for its innovation.

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